Just to read all the differing views on the same data, headspinningly silly number crunching...It's up to you to make your reality...

Date:   6/16/2005 11:44:02 AM ( 19 y ago)

Dollar weakens on soft capital inflows
Wed Jun 15, 2005 4:50 PM ET




NEW YORK (Reuters) - The dollar weakened on Wednesday after data showed that surprisingly weak capital inflows into the U.S. in April failed to cover the trade deficit for that month.
This was the second consecutive month that net Treasury International Capital (TIC) inflows failed to cover the U.S. trade gap, underscoring analysts' concerns that despite its 2005 rally, the dollar's structural frailties have not disappeared.

The dollar index, a broad measure of the dollar's value against a basket of major currencies, posted its biggest one-day decline in three months on Wednesday. Across the board, the dollar retreated from multi-month highs touched earlier in the global session.

"All in all, though April data is generally lost in the fog of the rear-view mirror, the numbers do not provide confidence that the dollar upswing will continue once the main longer-term short dollar exposure is unwound," wrote Alan Ruskin, director at research firm 4Cast, in a research note on Wednesday.

Soft U.S. consumer price inflation data for May and a Federal Reserve report that inflation pressures remain "modest" also helped cool expectations surrounding further Fed interest rate hikes and keep the dollar offered.

Late Wednesday, the euro was up at $1.2110, bouncing back sharply from another new nine-month low around $1.2015.

The dollar index was off 0.7 percent at 88.68.

Against the Swiss franc, the dollar fell 0.5 percent to 1.2707 francs and was down 0.2 percent against the Japanese yen at 109.21 yen.

Sterling rose to $1.8217, up 0.8 percent from late Tuesday.

U.S. net capital inflows totaled $47.4 billion in April, compared with a revised $40.6 billion in March. The country's trade deficits in April and March totaled $57 billion and $53.6 billion, respectively.

Wall Street economists had forecast net inflows of $60.0 billion in April, according to a Reuters poll.

The currency market monitors the capital flows report closely because of the huge U.S. current account deficit, of which trade is by far the largest major component. Worries about the United States' ability to finance the shortfall with foreign capital were the biggest driver of a 30 percent decline in the dollar index in the three years to the end of 2004.

But a year-long program of U.S. interest rate hikes, a deterioration of market sentiment toward Europe's economy and political unity, and bullish technical factors have boosted the dollar against the euro in recent weeks.

As a result, the TIC data garner less attention now than they did at the end of last year.

"There's slightly less concern about the financing of the deficit at the moment because it has not been widening," said Aziz McMahon, senior currency strategist at ABN Amro in New York. "In any event, there are other factors supporting the dollar."

The dollar was also kept under selling pressure by the 0.1 percent fall in U.S. consumer price index (CPI) in May, the first fall in 10 months, primarily due to a 2 percent plunge in energy costs. Markets had expected CPI to be flat after the previous month's 0.5 percent increase.

Excluding volatile food and energy costs, the core consumer price index rose by a smaller-than-expected 0.1 percent last month. Analysts had expected core CPI to rise 0.2 percent.

Lower inflation suggests the Federal Reserve could slow the pace of dollar-supportive interest rate increases.

"We still remain in a benign environment in terms of the core (inflation) number. This should be a moderate dollar-negative," said TJ Marta, senior currency strategist at RBC Capital Markets in New York.

The Fed's latest "Beige Book" snapshot of the U.S. economy showed that business activity continues to expand and that inflation remains contained.

Data released earlier Wednesday showed a rebound in the New York Fed's June manufacturing index to 11.65 from a revised minus 11.06 in May.

And U.S. industrial production rose 0.4 percent in May, rebounding from the 0.3 percent fall in April, the Fed said.


9th ~ so here's the rub...who is correct in their analysis~ NY Times, or Reuters reporters. Could it be a shorter term view by Reuters, and a longer term view by NY Times? I think Reuters wire service is a credible international source...You be the Judge?


 

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